The Effect of Corporate Governance on Corporate Fraud in Indonesian-Listed Banks: Sustainability Reporting as a Mediator

Prihatnolo Gandhi, Amidjaya (2023) The Effect of Corporate Governance on Corporate Fraud in Indonesian-Listed Banks: Sustainability Reporting as a Mediator. Masters thesis, Universiti Malaysia Sarawak.

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Abstract

The study investigates the effect of corporate governance on corporate fraud mediated by sustainability reporting and moderated by foreign ownership in Indonesian listed banks. A set of data from 42 listed banks during 2010-2018 with a total of 330 observations are analysed with ordered logistic regression using STATA. This study concludes that sustainability reporting practice in Indonesian listed banks is still considerably low despite the fact that the banking sector is selected by the capital market regulator as the first sector to initiate sustainable finance implementation. The result demonstrates that corporate governance has a significant negative effect on corporate fraud. However, sustainability reporting exhibits no significant mediating effect, implying that the practice is not optimum. Foreign ownership also shows no significant moderating role in the effect of corporate governance on corporate fraud mediated by sustainability reporting, probably due to the ownership origins that mostly come from other Asian countries with similar business characteristics. Based on the results of this study, the implementation of sustainability reporting in Indonesia should be improved to ensure that the reporting entity obtains maximum benefit from it, both internally and externally. This study contributes to fraud literature by providing new insights regarding the effect of sustainability reporting in fraud management following the limited studies in the field in the Indonesian context.

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